Fortuna's Next Mine Advances
Contributed Opinion

1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Fortuna Mining Corp., Altius Minerals Corp., Lara Exploration Ltd., Orogen Royalties Inc., Triple Flag, and Metalla Royalty & Streaming Ltd.
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Fortuna Mining Corp. (FSM:NYSE; FVI:TSX; FVI:BVL; F4S:FSE) published a preliminary economic assessment (PEA) on its planned next mine, the Diamba Sud project in Senegal, that shows a payback of capital in less than one year. Using a gold price of $2,750, the IRR is 72% and the payback of 0.8 years, with a low capex of $283 million. Low all-in sustaining costs (AISC) estimated at $1,238, will lower the company-wide cost profile.

The company will be well able to fund construction from its cash and existing line of credit. Diamba Sud, anticipated for production in 2Q 2028, with over 100,000 ounces of annual production, will then replace the production lost from the earlier sale of two declining and problematic mines.

This year's production is guided in the range of 309,000 to 339,000 gold equivalent ounces (GEOs). Fortuna fell sharply, with the gold price decline (its largest drop in nearly three months). The stock tends to be very sensitive to the gold price. But it is undervalued relative to peers, trading at less than six times cash flow (10 times free cash flow).

If you do not own it, take advantage of weakness to buy.

Altius's Royalty Revenue Jumps

Altius Minerals Corp. (ALS:TSX) reported better-than-expected 3Q royalty revenue across the portfolio; base metals and renewals were particularly strong. Relative to the 3Q last year, every segment saw increased revenue, except iron ore.

Royalty revenue jumped to over CA$21 million, up to CA$12.7 million in the last quarter. Interest income was also strong, given the increased cash balance. When Altius reports its financial results, there will be considerable "noise" given the sale of the Arthur royalty as well as the Orogen transaction (Altius was the largest shareholder in Orogen, which also sold its Arthur royalty as a company sale rather than the asset sale that Altius undertook).

Altius is a core holding for exposure to the broad commodity complex, but given the jump in the stock price after the revenue release — the highest in six months — we are holding.

Lara Advancing Its Planalto Project

Lara Exploration Ltd. (LRA:TSX.V) has acquired an additional exploration license adjacent to, and along strike of, its Planalto copper-gold project in the Carajas region of Brazil. There is an initial payment of CA$375,000 in shares, plus success fees for additional resources found with a minimum of US$500,000, and a 2% royalty.

Lara has minimal drill commitments under the agreement. The company is nearing completion of a PEA on the project, expected to be published this quarter. Separately, Lara has assigned an option to acquire its Itaituba Vanadium Titanium project, also in northern Brazil, to a Canadian company. Golcap can earn 90% of the project by issuing Lara 4 million shares and undertaking exploration of $2 million. It can also earn the remaining 10% with a payment of CA$250,000, additional shares, and a 2% royalty, plus a success fee.

Lara has the first to force Golcap to purchase the additional 10% after three years. The terms are attractive to Lara, giving it exposure to any success, and ensuring work on its projects.

Lara is a Strong Buy now, ahead of publication of the PEA.

Orogen Continues Activity

Orogen Royalties Inc. (OGN:TSXV; OGNNF:OTC) continues its frenetic pace of activity with another asset sale, this on the Firenz gold project in Nevada to an Australian company.

Altitude will pay a total of US$430,000 and grant a 3% royalty to Orogen and partner Altius, under whose alliance the project was staked.

US Shareholders Will Get Fully Taxed for Buyout

The Orogen/Triple Flag Precious Metals Corp. (TFPM:TSX; TFPM:NYSE) transaction, whereby Triple Flag acquired Orogen for cash and shares and spun out Orogen without the Arthur royalty, will be fully taxed to U.S. shareholders. It appears that both the cash and the Triple Flag shares will be taxed as a capital gain, while the value of the Orogen spin-out shares will be treated as a dividend (taxed at the taxpayer's marginal income tax rate).

Canadian shareholders will have an option to elect to defer part of the gain. We are still trying to obtain a different, more favorable opinion on the tax treatment, but it appears unlikely. The company did make every effort to structure the transaction in the most tax-efficient way overall. The structure was clearly better than an asset sale; the company would have paid tax on the proceeds, and then shareholders would have paid tax on any distribution of those proceeds, thus taxing the same proceeds twice in short order.

We are holding, looking for better opportunities to add to our holdings.

Nestlé Makes Some Progress

Nestle SA (NESN:VX; NSRGY:OTC) reported nine-month sales, emphasizing that RIG growth is the company's top priority. The company said that, along with other moves to reduce costs — targeting Sfr 3 billion by the end of 2027 — it would reduce headcount over this period. Sales rose 3.3% but most of that was due to pricing, with only 0.6% due to real internal growth ("RIG").

However, the third quarter saw RIG recover to 1.5%. Sales improved across all regions and all segments, though China remains a laggard. The company's ability to increase prices and still achieve some growth is notable; it was earlier thought that additional price increases would be difficult. The reduction in its global headcount total around 16,000 employees, of which 12,000 are white-collar workers.

This achieved annual savings of Sfr 1 billion, double the earlier targets, though restructuring costs are expected to be equivalent to two years' savings. The company expects ongoing improvements in RIG, despite macro uncertainties, as it continues to increase investments. The strategy outlined by CEO Philipp Navratil is much the same as that of his predecessor, Laurent Freixe, who was pushed out in a scandal last month. Navratil has not had the time to revamp the strategy, but equally, he emphasized the company's future success will all be down to delivering on goals. His assertive approach, as well as the 3Q rebound in RIG, saw the shares up sharply to their highest level since early June.

We are holding.

Royal's Streaming Geos Lower Than Expected

Royal Gold Inc. (RGLD:NASDAQ) reported 3Q streaming GEOs, well up on 2Q, though below analyst estimates; copper was slightly up. Streaming GEOs represent about 70% of the company's total production.

Separately, final approval has been granted for Royal's acquisition of Sandstorm and affiliated company Horizon Copper, with the closing anticipated for Monday.

This may see some selling pressure, as often happens on acquisitions, but if you are underinvested in the sector, this will be an opportunity to buy Royal Gold.

100% CLUB When we sent our last complete Current Holdings update (Bulletin #971), I mentioned that 13 of the 22 recommendations had returns over 100%. Now Orogen and Metalla Royalty & Streaming Ltd. (MTA:TSX.V; MTA:NYSE American)  join the "100% Club."